Local authorities are missing out on millions of pounds because of an £870m cash boost to business rate pilot councils, according to a study today from the respected Institute for Fiscal Studies (IFS) think-tank.
The IFS report found that the 147 councils that have been selected to experiment with a 100% business rate retention scheme (BRRS) will between them benefit by £873m in 2018/19.
Had the £873m instead been handed out to all English councils they would have received 2% extra funding worth £16 per head while one in 10 areas would have received £9m in extra funding.
The report read: ‘This revenue could have been used to reduce the budget deficit or fund tax cuts or higher central government spending. There is therefore an opportunity cost to the 100% business rates retention pilots.’
Despite their cost, the scope for learning from the pilots is ‘limited’ according to the IFS because the pilots - being ‘non-random’ and chosen by the Government - are ‘unlikely to be representative of all councils’ and because the length of the experiment is too short.
For more analysis on this report, please visit The MJ (£).
Why has the move towards 100% retention of business rates been so slow? Read our feature here.